GOLD HOVERING AROUND QE3

Last week precious metals edged down. But this week the Euro and the dollar played a different game for gold.


ECB President’s statement about doing “whatever it takes” to preserve the Euro had resulted in a rise in the Euro for a second consecutive day which in turn gave support to gold. Gold rose by 0.44% to $1,619.8; Silver edged down by 0.07% and reached $27.45. During July, gold increased by 0.44% while silver slipped by 0.6%.


Most major commodities also rose during Wednesday’s trading: crude oil prices including WTI and Brent oil traded up; gold and silver prices didn’t do much as gold increased while silver edged down


Apart from the recovery of the Euro, gold got a mid weak support from the Fed news that came up. The potential from more liquidity and easing measures by the FED led to this rise.


Gold futures pared gains in the US on Thursday after a larger-than-expected drop in US unemployment claims slightly dampened the market's expectations for additional quantitative easing (QE3) from the Federal Reserve. US Labor Department reported that unemployment claims last week fell to a 353,000, down from a revised 388,000 the previous week. This marks the sharpest week-on-week decline since February 2011.

Gold surged to another new 3-week high, probing above the 100-day moving average (1615.12) for the first time since April. Moreover, the weaker dollar too lent support to gold. A softer dollar tends to underpin all commodities by making them cheaper in other currencies, plus some market participants tend to buy gold as a hedge against dollar weakness.

Gold prices strengthened further at the domestic bullion market on Thursday amidst good jewellery buying also influenced by higher global trend. Onset of the festive season saw increase in demand for gold in the Indian market.

Markets in general seem once again to have latched on to the notion that central bank actions are the only viable catalyst to take them higher. They rise and fall as expectations of further easing wax and wane. The better than expected US data make it less likely that the Fed will act, so markets retreat.

GOLD LOSES ITS GLITTER

Gold and silver did not show much volatility from 2nd to 7th July. Post the Wednesday close (4^th July), gold and silver tumbled down, Reasons cited for this were the ECB rate reduction from 1% to 0.75% which in turn affected the Euro, oil and precious metals.

Moreover, the U.S payroll report stated that only 80K jobs were added which means that though there was a development, it was at a slower pace.

This week’s movement relied on the minutes of the FOMC Meeting, China's GDP for the second quarter, Euro Council Meeting and the U.S trade balance.

Gold and silver moved in different directions for the second straight day but both metals did not do much during the week. On a monthly scale both precious metals slightly declined

It was a mild “risk-off” trading day in the market place on Thursday. Wednesday afternoon’s FOMC minutes from the Federal Reserve that confirmed a sluggish U.S. economy was responsible for this, but provided no fresh clues on any upcoming Fed monetary-policy-easing moves. Most market bulls wanted the Fed to signal it’s embarking on another round of quantitative easing, better known as QE3.

Fears of weakening world economies exhibited modest risk aversion in the markets which in turn led to a moderate downfall in gold futures on Thursday.

Like other commodity markets, gold declined and proved to be a risk asset rather than a safe haven asset.

Spot Gold was last quoted at $ 1,567.50 on Thursday.

However, Friday had somethething else in basket for gold .Risk taking in the marketplace following the release of the Chinese GDP figure on Friday, resulted in the price of gold gaining close to $20 an ounce for the day. Investor confidence in the global economic recovery was boosted following the Chinese news, which came in close to its expected level. The precious metal ended up finishing the week at $1589.26.

This week, analysts are warning that gold may not be able to extend Friday's gains. While the Chinese GDP figure was viewed as positive by many investors, it still did not signal any expansion in the global economy. Given the current state of the euro-zone, as well as fears that the region's debt crisis could spread further, gold may reverse some of its gains in the coming day

In India, onset of the monsoon plays an important role in the economic growth. The gold market too, will be paying attention to the outcome of India’s monsoon season.

Good monsoon season is positively correlated with agricultural crop yields, in turn farmers’ incomes and higher gold demand. Rural farming areas account for approximately 60% of Indian gold buying. However, So far, the monsoon season is not off to a good start, with rainfall to July 10 reported by be 23% below average, although sowing levels, which are also important factors for agricultural yields, are pretty much in line with last year. The India Meteorological Department has said that the monsoon is likely to pick up in July and August, forecasting 98% and 96% of respective monthly averages. So for gold, while the initial indicators aren't so good, there's still time for some optimism to grow.